Opening German Fiscal Floodgates Won’t Save the Euro-Area Economy

(Bloomberg) --

If Berlin relents on calls to increase public spending, growth would be stronger at home and abroad, though Bloomberg Economics' simulations suggest opening the fiscal floodgates wouldn't transform the wider euro-area economy. Including the direct boost from Germany, a 1% of GDP investment stimulus would increase growth by 0.2 percentage point for the euro area as a whole. But the rate of expansion would be lifted by less than 0.1 point for France, Italy and Spain.

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